Third-Degree Price Discrimination in the Presence of Subsidies

Felder Stefan
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Felder Stefan: Otto-von-Guericke University,Magdeburg, Germany

German Economic Review, 2006, vol. 7, issue 4, 419-426

Abstract: According to a classical result, a move from uniform pricing to third-degree price discrimination only improves welfare if total output increases. In this paper I show that the classical result fails in the presence of subsidies. This finding appears to be relevant for the pharmaceutical sector where a consumer pays a fraction of the actual drug price due to health insurance coverage.

Keywords: Third-degree price discrimination; monopoly; uniform pricing; subsidies; drug markets (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1111/j.1468-0475.2006.00127.x

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